Enron & Tyco Case Studies

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Case Studies: Enron’s Fall and Tyco International’s Leadership Crisis
Grand Canyon University
BUS 604
November 4, 2009

Case Study: Enron’s Fall and Tyco International’s Leadership Crisis The tight Federal regulations now governing businesses and their accounting practices came about because one corporation, Enron, took risks their company could not withstand without taking some rather extreme measures in its accounting to hide the risk. Tyco International went down a different path in that the CEO used corporate accounts as his personal bank account. He placed certain business associates on the Board of Directors to ensure his behavior would
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These lawyers and accountants, along with the board of directors, approved key decisions made by the top leadership. (Ferrell, O. C., Fraedrich, J., & Ferrell, L. 2009)
3. What role did the CFO play in creating the problems that led to Enron’s financial problems? It seems that Fastow, Enron’s CFO, along with Skilling, Enron’s COO/CEO, played the biggest roles in the demise of the company; although the intricately complicated transactions being completed could not have been done by only one person, it has been alleged, and found to be true in court, that Fastow was a key player in creating the ‘off-the-balance-sheets’ entities to hide debt and inflate the true picture of Enron’s financial soundness. (Ferrell, O. C., Fraedrich, J., & Ferrell, L. 2009)
Case Study: Tyco International: Leadership Crisis
1. What are the ethical and legal issues in this case? Ethical Issues: Kozlowski named members of the Board of Directors (BoD) and filled it with ‘his’ people; Kozlowski went around then CEO Fort directly to the BoD to lobby for continuing its strategy of acquiring profitable companies, in direct contrast to what Fort was trying to accomplish; sheltered offshore subsidiaries’ foreign earnings to avoid U.S. taxes. The BoD members had memberships spanning 10-20 years which led to much conflict of interest between company and BoD members; buying a high-priced unofficial office overlooking Central Park and lavishing
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